Protocol
Disputes and arbitration
How a buyer opens a dispute, how long the seller has to answer, and how arbitrators drawn among $UNDO stakers decide contested cases.
Lifecycle
Most disputes are designed to end early. The seller can refund at any time, and a seller who does not answer loses by default. Arbitration is the last step, not the first.
| Step | Who acts | Deadline | If the deadline passes |
|---|---|---|---|
| Open a dispute | Buyer | inside the refund window | The payment can no longer be disputed |
| Refund or contest | Seller | 48h | The buyer wins |
| Commit-reveal vote | 3 arbitrators | 72h | Absent arbitrators are slashed |
| Appeal, once, with a doubled deposit | The appealing party | not final yet | The first decision stands |
| Appeal vote | 7 arbitrators | 72h | Absent arbitrators are slashed |
Opening a dispute
A buyer can open a dispute on any protected payment while its refund window is open. It does not matter whether the seller was paid instantly or the payment is in escrow.
The buyer deposits 2% of the payment amount, with a minimum of 1 USDC.
deposit = max(2% of amount, 1 USDC)
| Payment | 2% of amount | Deposit |
|---|---|---|
| 180 USDC | 3.60 USDC | 3.60 USDC |
| 20 USDC | 0.40 USDC | 1 USDC (minimum applies) |
The deposit is returned if the buyer wins. It exists to make empty disputes cost something. It is not a fee.
Seller response
The seller has 48h to do one of two things.
- Refund. The dispute ends. The buyer receives the refund and the deposit back.
- Contest. The seller submits evidence and the dispute goes to arbitration.
If the seller does nothing for 48h, the buyer wins. This is also the answer to a seller who disappears: silence is a loss, and the refund is paid through the refund waterfall. The bond cannot be withdrawn while exposure is open against it.
Arbitration
Drawing arbitrators
3 arbitrators are drawn at random among $UNDO stakers. Staking is what makes an address eligible to be drawn. The parties do not choose their arbitrators and cannot know them in advance.
Commit-reveal vote
Arbitrators vote within 72h, in two steps.
- Commit. Each arbitrator submits a hash of their vote and a secret value. Nobody can see how anyone voted.
- Reveal. Each arbitrator reveals the vote and the secret. The contract checks them against the hash.
Commit-reveal stops arbitrators from copying each other. Each one has to decide alone.
commitment = keccak256(vote, salt)
The majority decides. With 3 arbitrators, 2 matching votes are enough.
Slashing
Arbitrators who vote with the minority are slashed. So are arbitrators who are drawn and do not vote. The stake at risk gives arbitrators a reason to study the evidence and vote for the outcome that other careful arbitrators will reach.
Arbitrators are paid from protocol fees. 50% of every fee is allocated to arbitrators. See Fees.
Appeal
One appeal is possible. It goes to 7 arbitrators, drawn the same way, with a doubled deposit. For a 180 USDC payment, the appeal deposit is 7.20 USDC.
The appeal decision is final inside the protocol. There is no second appeal.
Agent lane: automatic refunds
Most Agent lane cases never reach arbitration.
Each paid API response must carry a receipt signed by the seller. If the receipt is missing or late, the refund is automatic. The Receipts contract checks the session record and the signature. Nobody votes.
Example: a monitoring agent opens a 5 USDC session at 0.02 USDC per call. The API goes down and 212 calls are paid without a signed receipt. 4.24 USDC is refunded automatically, no arbitration.
If a valid receipt exists and the payer still contests the content of the response, the case follows the standard process above. See Agent lane.
What arbitration does not do
- It can be wrong. Arbitrators are people with a stake, not judges. The appeal reduces errors but does not remove them. See Risks.
- It does not replace consumer law. A buyer keeps every right they have under the law that applies to their purchase. A seller keeps every obligation.
- It does not touch funds outside the protocol. An outcome moves the disputed amount and the deposits. Nothing else.